Insurance Myths

Myth #12: I only drive my car occasionally, so I don’t need higher limits.
The possibility of an accident is the same whether you drive a car every day or once a year.  Your liability for injury you cause or property you damage isn’t diminished because you don’t drive often. Make sure you always have good protection limits. If you’re looking to reduce expenses, consider increasing your deductible.

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Ocean Marine Insurance

Ocean Marine Insurance is the oldest form of insurance, probably dating to the Middle Ages. The organization of Marine Insurance took great steps forward with the formation and development of an insurance market on Lombard Street in London, England and subsequently-- since 1769--Lloyds of London. Today, Lloyds still plays a prominent role in Marine Insurance. The first American insurer was Insurance Company of North America (now CNA, one of the companies that writes insurance for Morris  Insurance Agency), formed in 1794. CNA has operated continuously since that time, and remains an important market for marine as well as other forms of property and casualty insurance.

Because of its long tradition, marine policies tend to be the most traditionally worded policies in the insurance industry, and to have the longest tradition of case law legal decisions covering the various terms and clauses of the policies. While care should be taken with any insurance to clarify any definitions provided in the policies, this is especially true in marine coverages, where the defined terms may have long histories.

There are four common policy types:

Marine Cargo Policy
Ocean Marine Insurance is designed to cover various hazards related to the movement of goods. The first and obvious protection that can be provided is for the cargoes themselves. This protection can be provided to the seller/shipper or to the buyer. Where ownership of and responsibility for the cargo are assumed is crucial in determining what coverage is needed. This used to be a simpler exercise than at present--as a limited number of shipping terms existed, e.g. FOB, CIF etc.

In 1990 the International Shipping Agency agreed on an expanded set of terms, which allow transfer of ownership and responsibility at various points along the transit route, including at customs borders.

Risks are unavoidable in the shipment of goods. Goods are loaded and transshipped. Travel on the ocean provides its own set of perils. These risks require that the shipper take reasonable steps to ensure the safety of his goods while in transit, for instance with proper packaging and/or containerizing, and shipping on a vessel appropriate for the goods in question.

Goods are generally handled many times during shipment, and Marine Insurance is designed to provide coverage throughout this process. Goods are first loaded at the origination point onto a land vehicle (truck or train, for instance). They are held in a port prior to loading onto a ship. They may be unloaded at an intermediate port, and held for transshipment on a second vessel. Upon arrival in the destination country, they must be cleared through customs, then loaded onto land carriers for transfer to the buyer's premises. (There may also be transfers between land transports on either the buyer's or the seller's end--during which time the goods are under the control of warehouse depot operators, and additional trucking or rail companies).

The marine policy may be scripted to meet a variety of situations and desired coverages. Generally, the policy covers perils of the sea, fire, assailing thieves, jettison, barratry of the master, explosion, defects in the ship that cause damage, and other perils

Exclusions in the policy are important, and should be reviewed with a qualified risk manager, such as your insurance agent. These typically include damage due to dampness, breakage, delay or loss of market, acts of war, confiscation, etc., strikes, riots or civil commotions.

Cargo War Risk Policy
The Cargo War Risk Policy is designed to provide coverage where the standard cargo policy ends, in times or places of war or similar (excluded) upheaval. The War Risk Policy covers almost all of the war risk perils excluded under the former policy. It is generally written at the same time as the Standard Cargo Policy. There are several significant differences in coverage, however. The War Risk Policy may exclude coverage while the covered goods are within specific geographic areas (typically areas deemed to be extremely dangerous--this happened briefly under Lloyds of London policies and others in the Red Sea during the Gulf War crisis). The War Risk Policy may be cancelled on very short notice--typically 48 hours (versus the 30 days notice of the Standard Cargo Policy). The policy also sharply curtails coverage when not on board ship--prior to loading, when being transshipped or after offloading in the country of final destination.

Hull Insurance
The basic Marine Policy is used to cover either the shipowner or the shipper (or buyer) of goods. When coverage is for goods it is termed a Cargo Policy; when the ship is covered, it is termed Hull Insurance. The shipowner is provided legal liability protection to others, for instance in the event of a collision.

The Hull Policy can be written for each voyage of a ship, or for a specified time period, typically one year. When written on a time period basis, an implied warranty of seaworthiness is applied to the vessel. This warranty does not adhere to the time basis coverage; it is deemed to present a potential hardship to the shipowner, since the ship may be at sea or at a port where suitable repairs might not be available, when coverage begins.

Yacht Policy
The Yacht Policy covers pleasure craft, such as yachts, motorboats and sailboats. It is written to cover both the property (boat, and contents) and its liability for collisions or injuries.

There are two Yacht Hull Policies. The Limited Hull Policy will only cover the specified perils of fire, lightning and theft. The Full Marine Policy additionally covers explosions, perils of the sea, theft, collision and conversion.

The Yacht Policy can also be written as all-risk coverage, in some cases. Like homeowners' all-risk policies, all hazards are covered unless specifically excluded. The perils generally excluded are wear and tear, gradual deterioration, or inherent vice, marine borers, vermin, loss caused by ice or freezing while afloat, loss to sails while racing, and petty theft or mysterious disappearance losses.